Multifamily Permits Hit Five-Year High in January

U.S. multifamily permit volumes reached the highest level since 2015, and construction starts hit a 34-year high in January.

A total of 522,000 multifamily units were approved for construction in the past year, while work actually got underway on an additional 547,000 units, according to seasonally adjusted data from the U.S. Census Bureau. That permit volume, a five-year high, was up 15.2% from December and 16% from a year ago. Starts were up 3% from December but a whopping 77.6% from January 2019.

On the single-family side of the housing market, activity also increased. Permits approached the 1 million-unit mark in January, increasing 6.4% from December and 20.2% from a year ago. At 1.01 million units, starts were down 5.9% for the month but up 4.6% from last January.

Together, total residential starts were 21.4% above last year’s pace at 1.57 million units, while total residential building permits were 17.9% above the January 2019 level with 1.55 million units permitted.

Annual multifamily permitting has averaged 436,000 units since mid-2015, but has averaged just under 500,000 units over the past six months. With only one exception, multifamily permitting has remained above the 436,000-unit level for 15 consecutive months. Starts of multifamily units, which is slightly more volatile than permits, have averaged close to 377,000 units annually since mid-2015, but have followed permits’ recent increases, topping 400,000 units in six of the past 12 months and 500,000 units for the past two months. Over the past 12 months, seasonally adjusted annual multifamily permits have averaged 464,000 units while multifamily starts have averaged 411,000 units.

With the higher annual rates over the past few months, total residential permitting levels have exceeded 1.4 million units in five of the previous six months and exceeded 1.5 million units in January for the first time since March 2007. Total residential starts averaged 1.3 million units in the past 12 months, while single-family starts averaged 899,000 units. Single-family starts topped the 1 million mark for the first time since July 2007 in December and again in January. Annual multifamily completions retracted slightly for the month, but were up 18.2% for the year, to 397,000 units.

On an annual basis, multifamily building permits were up by 51.3% in the smaller Northeast region and by almost a third in the Midwest (29.7%). They were up by 10.4% in the West region and by a modest 2.5% in the larger South region. Numerically, the changes were 36,000, 18,000, 14,000, and 5,000 units in the Northeast, Midwest, West and South, respectively.

Multifamily starts were also up in all regions of the country, with significant increases in the Midwest (147.1%, or 19,000 units) and West (122.9%, or 86,000 units), while the South (53%, or 87,000 units) and Northeast (77.3%, or 48,000 units) experienced solid gains as well. Regionally, multifamily completions more than doubled in the Midwest (184.0%) and were up in the South (19.8%) and West (46%), but the small Northeast region saw a decline in completions of -71%.

At the metro level, nine of last month’s top 10 permitting markets remained the same with a few changing places. The first three returned in order with New York, Houston and Dallas retaining last month’s top spots. Austin jumped up two spots to #4, pushing Seattle and Los Angeles down one spot each to #5 and #6, while Washington, DC, Minneapolis-St. Paul and Phoenix returned at #7 through #9. Last month’s #10 – Boston – slipped to #16 as Orlando returned to the top 10 at #10.

Six of the top 10 markets experienced increases in annual multifamily permitting from last year, with an average increase of 3,800 more permits than last year. New York saw the greatest increase of 7,650 units, followed by Phoenix with 4,932 units, Minneapolis-St. Paul with 4,523 units and Austin with 4,321 more multifamily units permitted than last year. Washington, DC and Houston had only modest gains from January 2019.

The remaining four markets saw decreases in permitting from -0.7% to -22.4%. In net units, Dallas permitted 4,403 fewer multifamily units than the preceding 12 months, while Los Angeles was down about 1,700 units from last year and Seattle’s annual rate was only slightly less than the previous year. Despite moving into the #10 spot this month, Orlando permitted 2,852 fewer units than the year before.

Other markets that saw significant decreases in annual multifamily permitting in the year-ending January were Atlanta (-4,388 units), San Jose (-3,327 units), San Francisco (-2,712 units), Baltimore (-1,936 units) and Boston (-1,887 units). A few small markets saw permitting decline sharply too such as Tacoma (-1,878 units), Oakland (-1,501 units), Milwaukee (-1,365 units) and Boulder (-1,123 units).

On the other side, non-top 10 markets that had significant increases in annual multifamily permitting include Fort Worth (4,932 units), Tampa (3,911 units), San Antonio (3,753 units), Salt Lake City (2,952 units) and Nashville (2,195 units).

The annual total of multifamily permits issued in the top 10 metros – 168,711 – was 8.9% greater than the 154,989 issued in the previous 12 months. The total number of permits issued in the top 10 metros was almost equal to the number of permits issued for the #11 through #39 ranked metros.

The list of top individual permitting places – cities, towns, boroughs and unincorporated counties – generally include the principal city of some of the most active metro areas. Much like the top 10 metro list, the top 10 permitting place list includes many of the same 10 cities or permit-issuing place as last month. For the first time in many months, either the city of Houston or Unincorporated Harris County (Houston) did not lead the list of top permitting places.

Austin took the top spot in January 2020, followed by the Houston area places. Charlotte’s Mecklenburg County and the city of Chicago round out the top five, as they did last month. Nashville returned at #6 and Phoenix moved up to #7 from #10 in December. The cities of Washington, San Antonio, and Denver rounded out the top 10.

Of the top permit-issuing cities or counties, Charlotte, Chicago, Nashville, San Antonio and Denver did not have their metro areas make the top 10 list for permits by metro. Consistently placing in the top three for metro-level permitting, New York and Dallas again had no permit issuing places in the top 10 as their apartment development pattern is more spread out around their metro areas.